Q2(B) Economics |Show That A Minimum Wage Set Above The ~ Life News

In a competitive market, the imposition of a minimum wage above the equilibrium wage necessarily reduces employment, as we learned in the module on perfectly competitive labor markets. In a monopsony market, however, a minimum wage above the equilibrium wage could increase employment at the same time as it boosts wages!The effects of minimum wages on employment have been widely debated internationally. Economic theory makes no clear predictions: although the traditional competitive model of the labour market suggests that a minimum wage rise will reduce employment - if set above the market clearing wage - other theoretical models can predict the opposite.Minimum wage rates vary greatly across many different jurisdictions, not only in setting a particular amount of money—for example $7.25 per hour ($14,500 per year) under certain US state laws (or $2.13 for employees who receive tips, which is known as the tipped minimum wage), $11.00 in the US state of Washington, or £7.83 (for those aged 25+) in the United Kingdom —but also in terms of which pay period (for example Russia and China set monthly minimum wages) or the scope of coverage.For a price floor to be effective, it must be set above the equilibrium price. If it's not above equilibrium, then the market won't sell below equilibrium and the price floor will be irrelevant. In the diagram above, the minimum price (P2) is below the equilibrium price at P1.The yellow circle called the "minimum wage zone" shows that a minimum wage should in principle remain targeted at the lowest-paid employees, to eliminate "unduly low pay"; the blue circle is the "collective bargaining zone" and illustrates the principle that collective bargaining can be used to set wages above an existing floor.

The Effect of Minimum Wage Increases on Wages, Hours

If the market wage is $4, firms can bid it up to $4.50, attract workers from other firms, and still turn a profit. If the market wage is higher, say $6, firms take a loss because workers cost more than their production is worth. In this situation, firms cut their payrolls to restore their profits.If the minimum wage is set above the equilibrium market wage, it: a) increases unemployment. b) is effective and reduces unemployment. c) equals the black market wage. d) is lower than firms are willing to pay for labor.Basic economic theory suggests that setting a minimum wage above the market equilibrium wage would result in a reduction in the demand for low-wage labour on the part of firms. This would occur as they substitute other inputs for the higher priced low-wage workers, and as they reduce their output because of the higher labour cost.The federal minimum wage of $7.25 an hour has remained unchanged since July 2009. 1 That works out to $290 for a 40-hour week and $14,500 for a 50-week year.

Minimum wage - Wikipedia

If a minimum wage is set above the market equilibrium wage, however, the market cannot reach equilibrium; thus the minimum wage is considered binding In the absence of price controls, a shortage puts upward pressure on wages until they rise to the equilibrium. True If the minimum wage is set at $8.50, the market will not reach equilibrium. True A binding minimum wage will contribute to aThe minimum wage is a pay floor. Employers are not allowed to pay their employees a rate below the minimum wage. This only causes problems if the minimum wage set is above the equilibrium wage rate that would otherwise prevail in the labour market. The diagram above is the classic minimum wage set up. You see the 'normal' supply and demand curves.A minimum wage is very similar to a price floor because it is set above the market wage. Increasing the minimum wage causes a drop in labor demand According to this illustration of the labor...In 2004, following a recommendation by the Low Pay Commission, a minimum wage of £3.00 per hour was introduced for under 18 year olds, and by 2015 this rate had risen to £3.87. In 2016 a new ' living wage ' was set for those over 25, at £7.20 per hour, rising to £7.50 per hour in April 2017. Although this is the 'legal' level of theThe lesson: When the minimum wage causes involuntary unemployment, raising welfare can serve as a band-aid for the labor market. Workers deprived of the right to provide for themselves can subsist on government money. Yet when welfare convinces people to abandon honest toil, raising the minimum wage is no band-aid.

When the minimum wage is set above the market-clearing wage of a aggressive labor market, the end result is:

A. An building up in the volume of work demanded

B. An building up in the amount of work supplied

C. Higher employment

D. A shortage of work

Assume that each 10% increase in the minimum wage raises the typical wage of retail clerks by means of 1%. If the pliancy of work demand is 0.6, how a lot will a 30% building up in the minimum wage scale back employment of retail clerks?

A. 0.6%

B. 1.5%

C. 1.8%

D. 5.0%